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Microcap & Penny Stocks : Bid.com International (BIDS) -- Ignore unavailable to you. Want to Upgrade?

To: donkeyman who wrote (4858)	1/7/1999 8:24:00 PM
From: Thomas Kirwin	Respond to of 37507

uBid Stock Analyst at Auctioneer's Banker Balks at Valuation Merrill Lynch Neutral on uBid Stock cbs.marketwatch.com Valuation Concerns UBid, which went public at $15 a share, is trading at a little more than eight times Cohen's revenue estimate for 1998. Rival Onsale (ONSL), by contrast, trades at about 2.4 times analysts' consensus revenue estimate, according to Cohen. Cohen said valuations based on a price-to-revenue multiples are appropriate for high-growth, high-margin companies in the Internet sector. And uBid, formerly a wholly owned unit of Creative Computers (MALL), has certainly displayed high growth, with its revenue surging from basically nothing in 1997 to $24.1 million in the first nine months of 1998. But high-margin it's not. It sells mainly refurbished or closed-out items on its site and has generated gross margins of about 8 percent. Onsale boasts margins of about 10 percent. Even in the year 2000, Cohen is only predicting 10.7 percent gross margins for uBid. To some observers, uBid provides a perfect example of how difficult it is for analysts to justify valuations for some Internet stocks. "Where these stocks are trading has much more to do with supply and demand than it does with [price-to-earnings ratios] or multiples to sales," said Linda Killian, portfolio manager of Renaissance Capital's IPO Fund. "The valuation methodologies that we're [using] to rationalize these stock prices are just that [an attempt to rationalize the prices]." Retail shopping The supply-and-demand explanation seems to carry a lot of weight considering that fewer than 2 million shares are in uBid's float. On Thursday, 1.7 million uBid shares, or nearly 93 percent of the float, changed hands. (It should be noted that many analysts think Nasdaq volume totals are often overestimated by as much as two to three times.) It's clear, too, that the stock price is being driven almost solely by retail investors, not institutions. Only three trades in uBid's stock were in blocks of 5,000 or more shares in the first two and half hours of Thursday's session. By contrast, IBM's stock saw three 5,000-plus blocks move in the first nine minutes of trading. UBid's Jones said the company had to limit the number of shares sold in the IPO to make the spin-off tax-free for Creative Computers. A follow-on stock offering is possible after 180 days, and other options to raise more money could be considered before then, he said. (For a recent analysis of the uBid IPO, click here.)